Burchells Ltd Owns a Machine That Originally Cost $36 000

question 64

Multiple Choice

Burchells Ltd owns a machine that originally cost $36 000.It has been depreciated using the straight-line method for 3 years,giving an accumulated depreciation of $15 000 (the salvage value was estimated at $6000 and the useful life at 6 years) .At the beginning of the current financial year its carrying value is therefore $21 000.It has been decided by the directors to revalue it to fair value,which is assessed to be $38 000.The salvage value and useful life are considered to be unchanged.What are the appropriate entries to record the revaluation using the net method and the depreciation expense for the current year (rounded to the nearest dollar) ?

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Definitions:

Futures Contract

A legally binding contract for the future transaction of goods or assets at a set price and predetermined date.

Cash Flows

Cash flows represent the net amount of cash and cash-equivalents being transferred into and out of a business, crucial for assessing its financial health, liquidity, and solvency.

Hedge

A strategy used in investing to minimize or offset the risk of adverse price movements in an asset.

Hedge Position

An investment made to reduce the risk of adverse price movements in an asset, often by taking an offsetting position in a related security.